Abstract
The incidence of money laundering, and the zeal with which international
anti-money laundering (AML) policy is pursued, varies significantly from
country to country, region to region. There are, however, quite substantial
social costs associated with a policy of toleration, and this begs the
question as to why such variance should exist. In this paper we claim that,
due to the globalisation of crime, if a single country should break the
“chain of accountability'', then it will provide a safe haven for criminals and
attract the total financial proceeds of crime. Because smaller economies are
best able to insulate themselves from the costs of crime, smaller countries
therefore bear only a tiny share of the total costs relative to potential
benefits of investment that money laundering offers, and so have a higher
incentive to tolerate the practice compared to their larger neighbours. As
such, we claim that the existence of a money laundering market is due to a
policy of AML 'defection', and that the degree of 'defection' depends largely
on the physical size of the country. In this paper we present a simple model
of policy competition which formalises this intuition.
anti-money laundering (AML) policy is pursued, varies significantly from
country to country, region to region. There are, however, quite substantial
social costs associated with a policy of toleration, and this begs the
question as to why such variance should exist. In this paper we claim that,
due to the globalisation of crime, if a single country should break the
“chain of accountability'', then it will provide a safe haven for criminals and
attract the total financial proceeds of crime. Because smaller economies are
best able to insulate themselves from the costs of crime, smaller countries
therefore bear only a tiny share of the total costs relative to potential
benefits of investment that money laundering offers, and so have a higher
incentive to tolerate the practice compared to their larger neighbours. As
such, we claim that the existence of a money laundering market is due to a
policy of AML 'defection', and that the degree of 'defection' depends largely
on the physical size of the country. In this paper we present a simple model
of policy competition which formalises this intuition.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 13 |
| Publication status | Published - Aug 2008 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 18 |
| Volume | 08 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- Money Laundering
- Policy Competition
- Systems Competition